Bank of China (Asia) and HSBC have expressed their intention to apply for a Hong Kong stablecoin license, with Chinese and foreign giants competing in the same arena.

The competition for stablecoin licenses in Hong Kong has entered a feverish stage. According to Hong Kong media reports on September 8, the Hong Kong Monetary Authority (HKMA) plans to issue only a few stablecoin licenses in the first phase, and as of the end of August, 77 institutions have expressed their intention to apply. Following Bank of China Hong Kong, Industrial and Commercial Bank of China (Asia) has officially applied to the financial regulator, and HSBC has also expressed its intention to join the fray. The market generally expects that Standard Chartered and Bank of China Hong Kong have a higher chance of obtaining the first batch of licenses.

Strategic Significance of Hong Kong Stablecoin Regulatory Pilot

Hong Kong, as an international financial center and China's "crypto laboratory", this stablecoin license pilot is not only an important step for local financial innovation but may also carry a deeper geopolitical mission.

As U.S. regulators approve dollar-pegged stablecoins and push for a doubling of the $5.7 trillion market size, the penetration rate of dollar stablecoins in global payments continues to rise, posing challenges to the monetary sovereignty of other countries.

China's Potential Layout: Offshore Renminbi Stablecoin

Despite China's strict restrictions on cryptocurrency trading and mining, it has never given up on the strategic value of blockchain technology and digital currency. Analysts believe that China may use Hong Kong as a pilot to issue an offshore Renminbi (CNH) stablecoin to counter the dominance of US dollar stablecoins in cross-border payments and international trade.

This model can both maintain the integrity of capital controls in the mainland and explore the circulation potential of tokenized Renminbi overseas.

Why have stablecoins become a key battleground?

Bridge role: stablecoin connects traditional fiat currencies with crypto assets, possessing payment and settlement functions.

Dollar Advantage: The scale of US short-term government bonds held by the issuers of USDT and USDC has surpassed that of China.

Cross-border payments: China's demand has surged, particularly in the areas of trade and capital flows.

Geopolitics: Against the backdrop of the U.S. potentially weaponizing financial sanctions, China seeks to reduce its dependence on the dollar.

Hong Kong's regulatory fence

To prevent the risks of money laundering and illegal fund flows, the Hong Kong Monetary Authority requires stablecoin issuers or licensed exchanges to verify the identity of token holders (KYC/KYB) for each issuance, redemption, or transaction.

Although this regulation is relatively strict for the crypto market, it is a necessary safety valve for China to ensure steady market growth rather than a short-term speculative frenzy.

Prospect

In the short term, the Hong Kong dollar stablecoin license will be the first to be implemented, but in the future, the launch of regulated digital currency in RMB or offshore RMB stablecoins cannot be ruled out.

Although this may not quickly increase the share of the Renminbi in global payments (currently less than 3%), it will become an important tool for China to maintain its financial influence in the geopolitical and international trade game.

Conclusion

The participation of Industrial and Commercial Bank of Asia and HSBC signifies that the competition for stablecoin licenses in Hong Kong is no longer just a local innovation, but a direct confrontation between Chinese and foreign giants in the new arena of digital finance. For China, Hong Kong's stablecoin pilot project may become a new strategic platform to counter the influence of the US dollar stablecoin and promote the internationalization of the renminbi.